Challenges for America's East Coast Shipping, Ports and Trade

By MarEx 2012-12-18 14:17:00

by Ernst G. Frankel

Now over 50 years since Malcolm McLean introduced containerization to break bulk shipping and thereby revolutionizing liner shipping, we are entering a new challenge, that of the mega ship. The widening of the Panama Canal, increase in its lock size, and order of mega ships by major liner operators and LNG shipping companies, present a new and difficult challenge to U.S. shipping and ports; few American ports on the US East coast are able to admit and serve such large ships, and apart from Savannah none seems to plan the major expansions required to take advantage of these new services provided by the large ships expected to serve the US East coast.

The new liners have a 14.5m draft, beam of 59m (193 ft.), and deadweight of 165,000 tons, with a total capacity of 18,000 TEU.  The expanded Panama Canal will encourage other liner operators to follow suit and also order bigger ships for the Far East-U.S. East Coast services.  Although the port of Savannah announced a $324m project of deepening its channel and basin depth, there is no other East Coast port capable of serving these large vessels.  This may mean that in the future much of the U.S. East Coast-Far East trade will have to be transshipped via Savannah or some foreign transshipment port in the Bahamas or Panama unless Savannah increases its throughput capacity appreciably.  Even so, such cargoes would have to be transported between Savannah and other East Coast locations by truck as there are no Jones Act qualified container vessels available to provide such service.  As a result, most of the containers would have to go by road and/or rail.

Considering that we already ship over 1,000 truckloads per day between Florida and the Northeast, these developments may double the traffic within a few years with a consequent increase in road congestion and air pollution. 

It would also reduce port traffic all along the East Coast.  Our highways are already terribly congested, in ill repair, and such feedering would add huge costs to road construction and maintenance.  It is increasingly evident that we must rebuild our domestic fleet and vastly increase waterborne freight transport, particularly coastal trade transportation.

We only carry about 20% of our ton miles by water and most of that on inland rivers versus over 80% for china.  We similarly now have to charter in foreign-built and owned vessels to meet our military transport demand (Maersk, APL, etc. vessels).  China gains a tremendous economic advantage just by transporting most of their freight by water which is much cheaper in monetary, economic, and environmental terms.  Recent studies show that if we could achieve an increase in water (mainly coastal) transport with China, we could add a few percentages to our economy, reduce oil consumption by 1-2 million barrels per day, have a cleaner environment, increase shipyard activity by providing U.S. shipyards with repair, maintenance, and conversion of hundreds of U.S. flag ships, increase U.S. seafaring, port and related industry employment, and probably add 1-2% to our economic output, while improving our economic competitiveness.

The Jones Act served us well until 20-30 years ago, but is now just a big albatross around our neck, particularly the U.S.-built requirements for cargo vessels.  I challenge any proponent of the Act to identify how and where it benefits America in ocean-going cargo shipping.  Let us get real and respond to the demands of today and challenge of the future and join the rest of the world.  In this wide open global economy, change is imposed by global developments and unless we respond to these new challenges, we will continue to loose trade, economic and strategic leadership, and ultimately our own future.

Ernst G. Frankel is Professor Emeritus of Ocean/Mechanical Engineering and Management at MIT; Director of AET Tankers and Offshore; member, Advisory Board of the Panama Canal; worked on nuclear ship propulsion for 40 years; served as Chief engineer of major shipping companies and shipbuilders.  Was head of the World Bank Shipping, Ports, Aviation, and Shipbuilding Projects; Advisor to IMO; President of the International Association of Maritime Economists; and Chairman of American President Lines.